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The biggest ever luxury goods deal is official: LVMH Buys Tiffany

posted onNovember 27, 2019
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Tiffany & Co has given up the fight to remain an independent company. Paris-based LVMH, the world’s biggest luxury group, is to take over the 182 year-old iconic New York jeweller for more than $16bn. Bernard Arnault’s empire with brands such as Louis Vuitton, Christian Dior and Bulgari, announced in a statement Monday (Nov. 25) that it will purchase Tiffany and its 300 stores worldwide at $135 a share. 

That is higher than the $120 per-share offer that the American jeweller-which is best known for its fine diamonds and luxury wedding rings apparently- rejected in late October as too low. The higher offer has been approved by the boards of both companies and is subject to the approval of regulators and shareholders. The deal is expected to be completed in mid-2020. 

The purchase price represents a 37 percent premium over Tiffany's stock price ($98.55 per share) the day before the news of the initial bid went public. The deal reportedly includes $350 million in net debt. 

LVMH's shares were up nearly 2 percent in market closing trading in Paris on the announcement, while Tiffany's New York-listed stock closed up more than 6 per cent. Shares in LVMH have risen 60 percent this year.

"The acquisition of Tiffany will strengthen LVMH's position in jewellery and further increase its presence in the United States," the companies said in a joint statement. 

Founded in 1837, when Charles Lewis Tiffany opened the first store in downtown Manhattan the brand is one of the best-known names in the sector, but has been struggling  to win over younger shoppers in recent years and has faced increasing competition from lower-cost rivals. 

Tiffany and Co 1887

(Photo: Tiffany & Company, Union Square, storage area with porcelain, c. 1887)

The US-China trade war is also taking a toll on sales as Chinese tourists, who make up a large proportion of luxury goods shoppers, retreat from the United States and spend more at home. 

The deal underlines the growing power of LVMH, which has 75 brands, 156,000 employees and a network of more than 4,590 stores. Europe’s second-most valuable company, with a market capitalisation surpassing €200 billion, reported 6.3 billion euros in profits in 2018 and generated €46.8bn in sales. Its other brands include Givenchy, Kenzo, Marc Jacobs, Tag Heuer, Dom Pérignon, Moet & Chandon, Veuve Clicquot and Krug.

“We have an immense respect and admiration for Tiffany and intend to develop this jewel with the same dedication and commitment that we have applied to each and every one of our maisons. LVMH's billionaire owner Bernard Arnault said. “We will be proud to have Tiffany sit alongside our iconic brands and look forward to ensuring that Tiffany continues to thrive for centuries to come” he added. Arnault, 70, is Europe's richest man.

LVMH

(Louis Vuitton ateliers d’Asnières, 1888, Archives Louis Vuitton)

Alessandro Bogliolo, who became Tiffany CEO in October 2017 said the transaction would "provide further support, resources and momentum." Bogliolo has worked for LVMH before, heading Bulgari when the European luxury conglomerate purchased the Italian brand for $5.2 billion in 2011. 

Just a few days before news of the Tiffany deal broke, Bogliolo spoke about the future of the company at Bloomberg's annual The Year Ahead: Luxury summit in New York.

"Customers, they don't care about your shareholders" he said. "Customers care about your product — about your brand, about sustainability, about the beauty of your products. This is what really makes success." 

Tiffany whose flagship store featured in the 1961 film Breakfast at Tiffany’s employs more than 14,000 people and had sales of $4.4 billion in 2018.

The new acquisition will strengthen the French house's exposure in the US market. Last month’s opening of a Louis Vuitton factory in Texas made clear that America is a big priority for the  Europe-headquartered LVMH. Will LVMH restore Tiffany’s faded shine?